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Topic: Selling your parking lot to your city to finance digital

Mark Gulbrandsen
Resident Trollmaster

Posts: 16657
From: Music City
Registered: Jun 99

posted 05-01-2014 02:04 PM

I had one customer sell a house and some property that was on his drive in property in order to get the $$ to buy the digital for his indoor theater just a mile away. The house was vacant for a number of years and was out front of the D.I. I thought it was a nifty way actually. Shed paying taxes on a vacant house and gain the indoor conversion. His indoor theater does pretty well. They still have not converted the D.I. yet. They will run film this summer and work on the monies for that conversion for next year.

Mark

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Leo Enticknap
Film God

Posts: 7474
From: Loma Linda, CA
Registered: Jul 2000

posted 05-01-2014 02:46 PM

quote: Terry Lynn-Stevens
Assuming that the guy owns the property out right, why sell an asset to fund what is clearly a business that is not viable.

To be fair we don't know that business is not viable, though the story which started this thread certainly begs the question. There are lots of small businesses that are perfectly viable, but which could not absorb a $90k one-time investment that they need to make just to be able to carry on doing what they're doing. A small business is very unlikely to have that sort of money lying around in cash, and the conversion to digital is not the sort of thing you can insure against.

At the risk of veering slightly OT, it would be interesting to see an in-depth study (a potential university dissertation for someone!) about how and over what timescale the "long tail" of smaller, independent theatres financed the conversion to sound in the early '30s (or didn't); and specifically the proportion that did so through bank loans, selling off capital assets, diversifying their income base, cost savings in other areas (e.g. not having to hire musicians anymore), and what proportion were effectively forced out of business because of that conversion. It's the best historical comparison we have to the digital conversion, IHMO: a non-optional technological upgrade that theatres have to find the money for in order to stay in business.

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

posted 05-01-2014 02:49 PM

quote: Terry Lynn-Stevens
its a really stupid move to sell the parking lot to buy a projector.

No it isn't. It's very possible this theater could be a viable location. Maybe his ticket prices are too low, for example. Maybe a good house-cleaning is in order, or some fairly cheap improvement such as new seat covers or re-foaming. Maybe they've got a bad booker.

Given everything else is good to go, it's way smarter to sell off an asset you're not using to finance an improvement than it is to go into debt to finance it. Also in the article it says the theater is for sale; if it's converted, it might be sellable, but nobody would buy it knowing they're going to immediately need to spend another 60 grand to update the equipment.

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Terry Lynn-Stevens
Phenomenal Film Handler

Posts: 1081
From: Toronto, Ontario, Canada
Registered: Dec 2012

posted 05-01-2014 04:57 PM

quote: Leo Enticknap
To be fair we don't know that business is not viable, though the story which started this thread certainly begs the question. There are lots of small businesses that are perfectly viable, but which could not absorb a $90k one-time investment that they need to make just to be able to carry on doing what they're doing.

The IMO, it should close. To me, the $90,000 asset is more important than keeping a likely older cinema open when more than likely the business is not doing well enough to be able to pay for such equipment long term.

quote: Leo Enticknap
At the risk of veering slightly OT, it would be interesting to see an in-depth study (a potential university dissertation for someone!) about how and over what timescale the "long tail" of smaller, independent theatres financed the conversion to sound in the early '30s (or didn't); and specifically the proportion that did so through bank loans, selling off capital assets, diversifying their income base, cost savings in other areas (e.g. not having to hire musicians anymore), and what proportion were effectively forced out of business because of that conversion. It's the best historical comparison we have to the digital conversion, IHMO: a non-optional technological upgrade that theatres have to find the money for in order to stay in business.

I think it would interesting to read something like that.

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

posted 05-01-2014 06:23 PM

quote: Terry Lynn-Stevens
The IMO, it should close. To me, the $90,000 asset is more important than keeping a likely older cinema open when more than likely the business is not doing well enough to be able to pay for such equipment long term.

Wow, good thing you're not a banker. If my banker had been as short-sighted as that, I probably wouldn't be in the business today. My theater was struggling financially when we bought it in 1979 and we have managed to stay in business, with a good credit rating, and upgrade to digital in the process. We did it by employing the exact process I mentioned above (fix the prices, upgrade the presentation, clean up the place and get a more agressive booker).

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Mike Frese
Master Film Handler

Posts: 465
From: Holts Summit, MO
Registered: Jun 2007

posted 05-02-2014 12:53 PM

The owner has withdrawn his proposal.

One of my points was that a TIF project should generatee much more tax money than it costs. Or increases the number of jobs.

In this example the following was going to occur IF the city bought the parking lot:

1) property taxes collected would decrease since the parking lot would not longer generate property taxes.
2) Business property taxes would increase with new equipment. Would it be enough to give the project a good ROI? I doubt it would.
3) The city has no sales tax. So sales tax revenue would remain the same.
4) no new employees would be hired with the switch to digital. In fact a reduction in hours might happen as the booth would not require as much babysitting while the theater is open. The projectionist could be selling tickets or popcorn vs threading movies.

Mike B.
How is you theater being booked aggressively? I think you book your theater pretty well and can see no reason why numerous people could not perform the same job including yourself.

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

posted 05-02-2014 04:26 PM

When we bought it, the previous owners had wanted to not pay anything over 35 or 40%, so we were playing movies far too late. We just told the booker we wanted to play popular movies while they were still "hot," regardless of the percentage, so that enabled us to get a lot of stuff within 3 to 5 weeks of the break. Then, that booker retired and the new guy was able to get us movies on the break. (He's been booking us about 14 years now.)

This same booker handles all of the theaters around us so I think we get slightly better results than we would if I did it myself, plus I have a day job so I don't really have time to do it myself.

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Terry Lynn-Stevens
Phenomenal Film Handler

Posts: 1081
From: Toronto, Ontario, Canada
Registered: Dec 2012

posted 05-03-2014 12:09 AM

quote: Mike Frese
The owner has withdrawn his proposal.

Good! Now he should bulldoze the theatre.

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Marcel Birgelen
Film God

Posts: 3357
From: Maastricht, Limburg, Netherlands
Registered: Feb 2012

posted 05-03-2014 02:41 AM

quote: Terry Lynn-Stevens
Good! Now he should bulldoze the theatre.

Terry will never miss an opportunity for a good troll.

And sure, let's just bulldoze it, because there is absolutely no value left in a 95 years old building...

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

posted 05-03-2014 09:10 AM

It's probably like Charlie Brown's Christmas tree... all it needs is a little love.

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Terry Lynn-Stevens
Phenomenal Film Handler

Posts: 1081
From: Toronto, Ontario, Canada
Registered: Dec 2012

posted 05-03-2014 11:17 AM

quote: Marcel Birgelen
Terry will never miss an opportunity for a good troll.

Great first post in the thread Marcel [thumbsup]

I would say you are the one who is trolling.

quote: Marcel Birgelen
because there is absolutely no value left in a 95 years old building...

There sure is no value in selling a $90k asset to fund a digital conversion for a theatre that more likely cannot pay for this conversion with its current ticket sales and attendance. Eventually, some theatres just need to close.

quote: Mike Blakesley
Wow, good thing you're not a banker. If my banker had been as short-sighted as that, I probably wouldn't be in the business today. .

And you are running one show a day, a mat on weekends and you have a day job, is your theatre really that viable? I would of twinned the balcony back in 79

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Mark Gulbrandsen
Resident Trollmaster

Posts: 16657
From: Music City
Registered: Jun 99

posted 05-03-2014 12:32 PM

If he has a parking lot worth 91K Christie would lease him a Solaria 1 and use that as collateral and he could still use the lot! What a lucky man he would be...

Mark

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Mike Blakesley
Film God

Posts: 12767
From: Forsyth, Montana
Registered: Jun 99

posted 05-03-2014 01:20 PM

quote: Terry Lynn-Stevens
And you are running one show a day, a mat on weekends and you have a day job, is your theatre really that viable? I would of twinned the balcony back in 79

Wow, here I thought I had gotten lucky and you were just ignoring me lately. Now you have the nerve to come on here and disparage my business even though you know nothing about it, and you call somebody ELSE a troll?

Shouldn't it be up to the owner of a business to decide if it's viable or not? It so happens that I'm in the theater business because I like it. It makes me feel good when people tell me how much they appreciate the job we do. My wife and I could probably live off of it if we had to, but having day jobs makes it possible for us to afford a better lifestyle, do something we enjoy doing in the evenings, and be able to upgrade the theater from time to time.

The bottom line is, if a business brings satisfaction and profit to its owner, and shows growth over time, then it's viable.

We run the schedule we do because it's the smartest schedule to run for the size of market we are in.

And, the balcony is not large enough to twin, plus the projection booth is behind it.

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Monte L Fullmer
Film God

Posts: 8367
From: Nampa, Idaho, USA
Registered: Nov 2004

posted 05-03-2014 02:06 PM

Course, Mike is always weary of opposition coming into his town being he's the only screen in the community.

Thus, he has to stay open along with doing the conversion just to stay one step ahead of the game at all times.

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Terry Lynn-Stevens
Phenomenal Film Handler

Posts: 1081
From: Toronto, Ontario, Canada
Registered: Dec 2012

posted 05-03-2014 02:46 PM

quote: Mike Blakesley
Wow, here I thought I had gotten lucky and you were just ignoring me lately. Now you have the nerve to come on here and disparage my business even though you know nothing about it, and you call somebody ELSE a troll?

Calm down, in my area Cineplex and Empire Theatres (now sold off) recently abandoned the late shows and afternoon shows at a few of their under performing locations. It was the sign of death that the closure of the theatre was imminent. On May 1st, Silver City Mississauga (10 plex) closed their doors, as they were winding down operations, for the last two years they had no 9pm shows and they only ran one matinee on the weekends. Canada's largest multiplex (Interchange 30) no longer runs first matinees/late show during the week. I find it very hard to believe that a small town theatre that needs a $90k upgrade is viable on a single screen.

quote: Mark Gulbrandsen
If he has a parking lot worth 91K Christie would lease him a Solaria 1 and use that as collateral and he could still use the lot! What a lucky man he would be..
Mark

Realistically, what would the monthly cost be to lease one of these machines?

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